Make this the year you get out of debt

Great job, great apartment, great friends. What’s not so enviable? Her debt. Last year her roommate skipped town. As Molly scrambled to pay bills, she maxed out her credit cards and stopped making payments on her art school loans. The interest rate on two of her four cards soared to the default rate of 29 percent. Collection agencies started calling. Now she’s about $79,000 in debt. Don’t even ask about credit scores. “My family thinks I should just declare bankruptcy,” she says. “But I got into this, and it’s up to me to make sure I get out.”

Molly’s situation is not that unusual. Fifty-five percent of women ages 25 to 34 spend at least half of every dollar they make paying off debt, according to an online survey by LendingTree, a mortgage company. And 32 percent have $10,000 or more in credit card debt alone. How do women get in so deep? Our shopping habits play a role: Besides pulling out the plastic for high-ticket items, women are slightly more likely than men to charge necessities like utilities and quickie purchases like bottled water, the survey found. “There’s been a bleed-through from needs to wants,” says financial guru Gerri Detweiler, author of The Ultimate Credit Handbook. “Many women think they are entitled to certain luxuries like eating out, getting lattes, having a manicure, buying an iPod.” These little items can have a steep cost: High credit card debt can put big dreams—a wedding, a car, a down payment on a home—out of reach, not to mention leave you without a safety net for a cash crunch like Molly’s. How can you climb out of debt and keep your dreams within sight?

Use only cash for a month and log every cent you spend. If you must use your card, keep tracking your spending; don’t just list it as “credit card bill” in your check register. This will identify spending areas that may shock you into changing your habits.

Weigh every new purchase in terms of its actual cost. If you buy something on credit and don’t pay it off right away, on average you’re paying an extra 14 cents on every dollar on the price tag. Multiply that 14 cents by a few thousand over the course of the year and you’re suddenly wasting hundreds of dollars. That’s money you could spend on something you really want—or to scrape your way out of an emergency. If dollar signs don’t convince you, consider time: If you splurge on a $600 pair of shoes and pay them off as slowly as the credit card company allows, it will take you seven years and 10 months with a typical interest rate of 14 percent. Will you still love those shoes in 2015? (Visit feedthepig.org to compare payoff scenarios.)

Ask yourself if you need something or just want it. If you need it, try to put the purchase off until you can pay cash. Can it wait until tomorrow? Next week?

Negotiate with your card companies for a lower interest rate. If they won’t give you one, switch to the lowest-rate card you can get.

Pay more than the minimum. Just $10 extra a month on a $3,000 card balance will save you $2,100 in interest and close to 17 years of payments.

Above all, remember it is possible to get out of debt. “Women have a tendency to make excuses, but with a little belt-tightening, it can be done,” says Julia Heath, chair of the University of Memphis economics department, who speaks about debt to professional women’s groups. Molly cut back on takeout food and binge shopping. She is current with her cards again, is up-to-date on all her other bills and is beginning to chip away at her student loans. It won’t happen overnight, but she’s not giving up. “I can do this,” she says. “I have to.”